Saving are importance for person due to following reasons:
1. Economic security:
The main of saving is to provide economic security to the family. Economic security is required due to following reasons:
1. Future is uncertain. Nobody knows what will happen tomorrow. Untimely death of head of the family may lead to economic crisis in the family. The only way to come out of this crisis is through saving.
2. On retirement, a person gets about 50% of his pay as pension. It is very difficult to meet both ends in this income. In such a situation, he resorts to his savings and fulfill his needs. In the absence of savings, he will have to face economic crisis.
1. In case of loss of the job, losses in business or closure of business, there is sudden drop in income. In such circumstances, only savings comes to one’s rescue from the crisis. In the absence of savings, one has to take loans which might lead to economic crisis.
2. Another aim of savings is to provide economic security in case of physical disability. Such physical disability can be caused due to accident, chronic diseases or old age. Sometimes this disability becomes permanent. At such times only the investment in savings helps in meeting the requirements of the family.
2. Increase in income.
Savings increase the family income. If the savings are properly invested, additional money is earned in the form of dividends or interest. The principal amount remains safe and interest amount goes on multiplying. It also helps in increasing national capital.
3. Restriction on unnecessary expenses.
For savings, one has to spend according to the budget. By budgeting, money is spent on necessities and expenditure on comforts and luxuries is restricted.
4. Habit of meagre spending.
Savings help in inculcating the habit of meagre spending in the members of the family. In its absence, the person always spends more than his income. It leads to indebtedness and insecurity.
5. Minimizing disparity in income and expenditure.
Savings help the family
members in minimizing the disparities between the income and the expenditure. The aim of savings is to make provision for future needs which may not be met in the income. Such savings are especially beneficial for persons with irregular income.
6. For fulfilling the future needs.
Savings are essential for the different stages of life cycle. In the initial stages, when the children are small and their demands are few requiring lesser amount of money? But in later phase one has to spend more on the higher education, marriage, etc. of the children.
Expenditure increases due to some unforeseen pleasant and unpleasant happenings in the future. To meet these exigencies one has to resort to one’s savings. For the long term goal of the family like building house, buying a car, education and marriage of children, buying some material goods are possible only through savings. It is difficult to buy all these items from limited income. By saving small amounts for the long period, huge amount is gradually saved to meet these demands.
7. Helping in implementation of national plans.
Savings made by an individual is invested in the developmental plans of the nation. Savings are used for national defence and development.